LDN - Business

Stocks stay strong, BOJ caution trips yen

[February 08, 2024] By Marc Jones

LONDON (Reuters) - World stocks were flying high on Thursday as China's recent slew of support measures, and reassurances that Japan's interest rates will not shoot up, kept the bulls in charge following record peaks on Wall Street.

Europe, where stocks are up nearly 15% since November, made a solid start as fractional gains in London Paris and Milan kept MSCI's main 47-country world index at an almost two-year high.

Sizzling recent U.S. economic data meant bond traders were continuing to scale back how fast they expect top central banks to cut interest rates this year, while a tumble in Japan's yen showed just how flighty things have become.

"We are just trading central banks," Societe Generale's Kit Juckes said, after one of Japan's deputy central bank governors Shinichi Uchida stressed its rates were unlikely to be raised aggressively as it lifts them out of negative territory.

"Otherwise I think everyone is amazed by the U.S. data. It is just shockingly strong," Juckes added, pointing out surging jobs growth figures. His bank has just become the latest to scale back its forecast on U.S. rate cuts.

Both Fed and European Central Bank policymakers have been pushing back against market expectations of rapid cuts in recent weeks as they try to gauge whether the inflation spike that began two years ago really has been tamed.

The euro was barely changed at $1.077, while Germany's 10-year government bond yield, the benchmark for European borrowing markets, rose 2 basis points (bps) to 2.32%.

U.S. Treasuries were in a holding pattern, with the yield on benchmark 10-year notes a touch higher at 4.11%. That left it up about 8 basis points for the week, although well below the 5% peaks of October.

Traders have almost written off the chance of a March Fed cut but are still pricing in an 80% probability of one as early as May, with futures implying around 120 basis points of easing for all of 2024, down from 145 basis points late last week.

Wall Street futures were pointing a slow start for New York later after the latest record highs for the S&P 500 and Dow Jones Industrial Average. [.N]

Europe was wading through a deluge of mixed earnings.

Shipping giant Maersk, drugmaker Astrazeneca and Credit Agricole all saw losses following dour results although consumer goods behemoth Unilever jumped more than 2% as it launched a 1.5 billion euro ($1.62 billion) share buyback and posted a rise in sales. [.EU]

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A passerby walks past an electric monitor displaying various countries' stock price index outside a bank in Tokyo, Japan, March 22, 2023. REUTERS/Issei Kato/File Photo

In Asia, Japan's Nikkei had surged 2.1% to close at its highest level in 34 years, helped by the BOJ comments and a 10% leap in SoftBank shares after key holding Arm, which designs microchips, lifted profit forecasts.

Elsewhere, share markets mostly were higher but Hong Kong's Hang Seng was an outlier, closing down 1.3% while Alibaba slumped over 6% as its third-quarter revenue missed estimates.

China's mainland shares held onto the strong gains they have made this week too ahead of the week-long Lunar New Year holiday, which starts on Friday.

The Shanghai composite index is up 4.7% for the week, the biggest gain since early November, while China's blue-chips index is headed for a weekly gain of 5.4%. [.SS]

Investors have taken leadership change at the top of China's market regulator, announced on Wednesday, as another sign that authorities are taking note of the pain.

Separately, data showed China's consumer price index (CPI) was down 0.8% in January from a year earlier, the biggest drop since 2009, although on a monthly basis, CPI rose 0.3%, picking up from the previous month.

In the commodity markets, oil prices steadied at just above $79 a barrel, having risen for a third straight day on Wednesday as Israel rejected a Hamas offer for a ceasefire in Gaza. [O/R]

Spot gold was flat at $2,031.72, bitcoin nudged up to $44,719, while the bellwether industrial metal copper ticked up off a 3-week low.

Wall Street's S&P 500 record high on Wednesday had been helped by gains in tech stocks again as well as strong earnings from Chipotle Mexican Grill and Ford.

Shares in the battered regional bank New York Community Bancorp had also turned around another tumble to close higher after the lender appointed a new executive chairman and said it could cut exposure to commercial real estate. ($1 = 0.9280 euros)

(Additional repoting by Stella Qui in Sydney; Editing by Kevin Liffey)

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